How to claim expenses as a sole trader in the UK

If you are self-employed, you only pay tax on your profit: your income minus your allowable business expenses. Claim everything you are entitled to and your tax bill goes down. Lose the receipts and you pay more than you should. This guide covers what a UK sole trader can claim, what records to keep, and how to make it painless.

What counts as an allowable expense?

HMRC allows costs that are incurred "wholly and exclusively" for your business. Common examples include:

• Office costs — stationery, phone and internet (the business share), software subscriptions.
• Travel — fuel, parking, train and bus fares, and insurance and repairs for business trips.
• Stock and materials you use or resell.
• Professional costs — accountant fees, insurance, professional memberships.
• Marketing — a website, advertising, business cards.
• Equipment — tools and computers. These can fall under capital allowances rather than ordinary expenses, so ask your accountant how to treat them.
• Working from home — a share of household costs, or a flat rate (see simplified expenses below).

The trading allowance: when you cannot claim expenses

If your self-employed income is small, HMRC's tax-free trading allowance may apply. It is an alternative to claiming expenses, not an extra: if you use the trading allowance, you cannot also deduct your actual expenses. Which option leaves you better off depends on how much you spend, so compare both. Check the current allowance on gov.uk.

What you cannot claim

• Everyday clothing, even if you only wear it for work.
• Entertaining clients.
• Fines and penalties.
• Personal costs, or the personal share of mixed-use costs such as a phone or a car.

Mixed personal and business costs

If something is used for both business and personal purposes, claim only the business share. Keep a short note of how you worked out the split, for example "60% of my phone bill, based on business use". If HMRC ever asks, a reasoned split you wrote down at the time is far easier to defend than a guess made later.

Simplified expenses

HMRC offers flat rates so you do not have to calculate every cost:

• Vehicles — a set rate per business mile instead of tracking fuel and repairs.
• Working from home — a flat monthly amount based on the hours you work at home.
• Living at your business premises — a flat monthly deduction.

The current rates are published on gov.uk. Compare the flat rate with your real costs and use whichever gives the better result.

What records should you keep?

You must keep records of your income and expenses for at least 5 years after the 31 January Self Assessment deadline for that tax year. For each expense, keep:

• The receipt or invoice.
• The date and the amount.
• What it was for, and who supplied it.

The 5-year period is the standard rule. If you file your return very late, a different period can apply, so check HMRC's guidance on how long to keep records.

A clear photo of a paper receipt is usually acceptable as long as it is legible and stored safely. Check HMRC's current guidance on record keeping if you are unsure.

Common mistakes

1. Losing paper receipts. Thermal receipts fade quickly. Photograph them straight away.
2. Leaving it all until January. A year's worth of receipts takes hours to sort and details get forgotten.
3. Claiming personal items. This can cause problems if HMRC reviews your return.
4. Mixing business and personal spending. A separate business bank account makes everything easier to trace.

A simple system that works

1. Capture every receipt on the day you get it.
2. Record the date, amount, supplier and category.
3. Review once a month.
4. Export a summary at year end for your accountant or tax return.

You can do this with a spreadsheet and a folder of photos, or with an expense app that reads receipts and builds the summary for you. InvoFlow's individual workspace does the second: you photograph a receipt, OCR fills in the details (which you can always correct), and you can export a PDF or CSV for your accountant. For how the same loop works for teams, see our guide to UK employee expense management.

Next steps

• Check gov.uk for current HMRC rates and rules.
• Talk to an accountant if your situation is complicated.
• Pick one tracking method and stick to it.

This guide is general information, not tax advice. Rules and rates change, so always check the latest HMRC guidance for your situation.